Apple Grows Even Leaner, But is it Meaner?

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Apple Grows Even Leaner, But is it Meaner?

After weeks of spinning at top speed, the Apple rumor mill fell silent Friday afternoon, when the company delivered the grim goods - 30 percent of its staff gone in a clap. Not to mention the end of R&D for several product lines.

In recent weeks, the computer industry has been abuzz with speculation on everything from the number of layoffs to the security of CEO Gil Amelio's own job. In the end, Amelio failed to pull any rabbits out of the restructuring hat hefty enough to pull the company to a turning point or chew down its huge operating losses.

"It's not a significant change in their business model," said Daniel Kunstler, an analyst at JP Morgan, after hearing the few specifics offered in the much-anticipated restructuring announcement.

Bottom line, Apple is still pining for a cross-platform miracle with all the mainstream commercial appeal of Wintel and the old-time devotion of its Mac following. But if Friday's announcement was any indication, the company needs an intense period of strengthening its core before it can branch out into new directions.

"I think the whole company needs a period of focus and stability," said Amelio. "What we want for our computer is for half of it to represent the industry standard and the other half to be differentiated - to have the secret sauce that makes Mac so wonderful and easy to use."

Apple will cut operating expenses, streamline product development and refocus marketing efforts on a smaller line of products bearing the Macintosh name. That may help dispel the consumer confusion around the Performa and PowerPC names that Guerrino De Luca, Apple's new vice president of marketing, flagged at the conference.

The Newton and Claris divisions were spared any cuts, although Mac developer Dave Winer suggested the likely scenario that Apple will sell either or both divisions. During the conference call arranged to announce the restructuring, De Luca said that some technologies may be licensed out to third parties for ongoing development.

But it remained unclear if Friday's announcements marked any kind of "cusp," as Amelio announced the layoffs and the discontinuation of development efforts for several technologies, like OpenDoc, CyberDog, the AIX software server and video conferencing.

The meat of the changes revealed Friday lay in the layoffs. Some 2,700 full-time employees will be cut loose, with the first round of notifications expected later this month. An additional 1,400 contract and temporary workers will also be cut from the payroll to make for a total of about 4,100 of the company's 13,000 workers.

Nearly half of the workers to be let go are employed outside of the US, which may prove a telling sign of Apple's plans for the future. While many Wintel makers are now counting on foreign PC sales to provide the bulk of their market growth, Apple looks to be reigning in its effort in a similar direction. However, no cuts are planned for Apple's facilities in Japan, said CFO Fred Anderson.

Restructuring costs are estimated to total some US$250 million, including a $155 million charge in the second quarter. Apple forecasts a return to profitability in the fourth quarter.

On the topic of his own job, Amelio brushed aside reports that he would be shuffled out in the reorganization. "Why would I want to stand aside at a time when I'm right on the cusp of turning this business around?"